The Bangko Sentral ng Pilipinas (BSP) has issued a memorandum authorising the country's thrift banks to rediscount packing loans and export bills.

The move follows the central bank's decision last year to allow thrift banks to issue letters of credit (L/Cs) in foreign currency.

New memorandum

On 6 December, the BSP issued the following memorandum:

"In line with Circular Nos. 650 and 686 dated 9 March 2009 and 20 April 2010, respectively, authorising thrift banks to issue foreign L/Cs and pay or accept or negotiate import or export drafts or bills of exchange, subject to the approval of the Monetary Board, please be advised that packing loans and export bills may be rediscounted with the BSP either in peso, dollar or yen currency."

Benefits

Essentially, the rediscount facility allows thrift banks to borrow from the BSP using the promissory notes or loan papers of their borrowers as collateral.

The move is aimed at preventing thrift bank customers looking for more sophisticated trade finance instruments migrating to commercial banks.

L/C changes

In 2009, the BSP said that the country's thrift banks could issue L/Cs in foreign currencies to service the needs of clients engaged in international trading.

The decision aimed to benefit the thrift banks that essentially serve the Philippines' small- and medium-sized enterprises (DC World News, 26 June 2009).

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.